Friday, August 10, 2007

Keeping it real on real estate trends

Am I surprised to see that institutional investors in the Gulf Cooperation Council have given a strong endorsement to the region's listed financial institutions, which have dislodged real estate as the most attractive sector, according to a survey conducted by HSBC?

Not really.

For me, the more interesting aspect of the findings was that real estate listed companies come second to the financial sector as the most attractive sector for investors in the region.

Real estate has had its day, rather years, and still is having a splendid run, with huge demand from foreign investors, many of whom happened to be European expats moving to enjoy the sunny climes and sandy beaches of the Gulf.

The demand for real estate moved into high gear with the freehold laws being brought into force and investors getting full entitlement for the properties they were buying.

And because of these factors, funds chased real estate projects, and real estate listed companies did (and are still doing) remarkably well.

It's not difficult to get into the minds of the institutional investors. With lots of supply coming on in 2008-09, real estate is expected to slow down.

By how much is another matter. Various research reports have played it safe on guessing that, but nobody is expecting a crash.

With this scenario in the offing, it's not surprising that institutional investors are going for the listed companies in the financial sector, comprising both commercial and investment banks.

"With real estate developing fast and banks maturing, interest in the latter is bound to develop," says Mohammad Ebeid, head of institutional sales at EFG-Hermes. "And of course, this increasing interest in the banking sector has come about because of growing demand for Islamic financing, especially sukuk. Generally the demand for sukuk is big."

The banking sector is picking up in regions like Qatar, Oman and Abu Dhabi. Most of the banks in Abu Dhabi have lagged behind those in Dubai in the last few years. That has to do with the fact that Abu Dhabi is not having the same scale of real estate developments as in Dubai. But now the banks in Abu Dhabi are picking up, growing their asset base and loan books.

Qatar, for example, says Ebeid, is expected to have the highest GDP per capita (of about $80,000) within the next three to four years. Lots of expats are going to move into the country, spiking the demand for retail projects. "More and more banks are needed to serve these people, and the expectation among analysts is that the banking sector will see a healthy growth."

Institutional investors normally greet such kind of signals positively before it really happens, and that's the trigger for such kind of demand for the banking sector.

Investors cleaning up in Russia

Bill Browder is perhaps the best example of the potential dangers of activist investing.

The Moscow office of his has been bugged, his staff intimidated, he has been sued for defamation and, finally, the largest foreign investor in the Russian stock market was barred from the country 16 months ago as a threat to "the security of the state".

Browder, 43, does not look like a danger to any country's security. On the contrary, he comes from a standard-issue middle-aged investment banker mould, balding with a dark suit and spectacles, fitting his history as a former proprietary trader at Salomon Brothers.

But taking on Russia's super-rich oligarchs over the past 11 years has left him with enemies powerful enough to secure his ejection from the country. This has done nothing to damp his enthusiasm for investing in what may be some of the world's worst-run companies.

After returns of 38.6 per cent from Hermitage's involvement in Russia last year, he is extending his aggressive activism outside the country for the first time with a $625 million fund raised last month. "There's still enough in Russia to keep me busy," he says. "But there are opportunities elsewhere as well."


Browder's move breaks a lifetime of focusing on Russia. His grandmother was Russian and his grandfather, Earl, was general secretary of the Communist party in the US. He moved from picking deep-value stocks to activism out of desperation. One big investment, oil holding company Sidanco, tried to issue convertible bonds to controlling shareholders at a 96 per cent discount, which would have left Hermitage almost $100 million out of pocket.

His legal and regulatory attempts to block the move failed, but after he persuaded the international press to report the situation, Browder concluded that in Russia the public outcry created by the media was the best way to put pressure on management.

He won that case, and went on to take on Gaz-prom, Sberbank, and UES among others. In the chaotic markets that followed the downfall of Communism, the courts and regulators had little power.

Following the devaluation of the rouble in 1998, executives found they had no hope of securing western investment, removing the only remaining incentive to behave.

"We tried the courts and regulators, but had limited luck. We only had the press. We took positions, intensively researched those companies and disclosed all the questionable activities," Browder says. This approach has delivered phenomenal returns to Hermitage investors, turning $100 invested when he set the fund up with the late Edmond Safra in 1996 into $2,497 by the end of March this year, against $1,592 for the CSFB ROS Russia index.

In the process it has made Browder himself incredibly rich. He pocketed $160 million last year, according to estimates from Alpha Magazine.

It has also helped transform corporate governance at many of Russia's biggest companies.

A study by Alexander Dyck, an associate professor at the University of Toronto's Rotman School of Management, went even further.

He identified a "Hermitage effect", where the presence of the fund as an investor increased the chance of stopping corporate abuse from 29 to 70 per cent - while quadrupling coverage in international newspapers.

Dyck says Hermitage is also an almost-perfect test case proving that shareholder activism generates value, as Russia at the start of the decade had none of the alternative protections that complicate studies in the US and Europe.

Invest Malaysia

Expectations Govt may announce scrapping real property gains tax Wednesday

PETALING JAYA: Expectations are running high that the Government may abolish the real property gains tax (RPGT) and announce the move at the three-day Invest Malaysia conference which starts tomorrow.

Construction and property stocks on Bursa Malaysia were generally firm yesterday, as the construction index rose 2.1% and property index added 1.8% as the two top sector indices yesterday.

The big gainers were property developers and construction players that included SP Setia Bhd, which rose 45 sen to RM7.10, Gamuda Bhd (up 20 sen to RM7.05), UEM World Bhd (up 14 sen to RM3.40) and IJM Corp Bhd (up 5 sen to RM8.40).

RPGT is a tax on profits from a sale of properties less than five years after they were bought, and was introduced many years ago to curb speculation on house prices.

Invest Malaysia, jointly organised by Bursa Malaysia Bhd, RHB Investment Bank and UBS Securities, appears to be attracting close to 100% more local and foreign participants than year’s conference.

About 1,000 fund managers are expected to attend the conference compared with 500 participants last year.

According to an official from Bursa Malaysia, there was a 36% increase in foreign participation from last year, which was a “good indication of rising foreign interest in our market.”

The central themes this year are the Ninth Malaysia Plan (9MP) and an update on the government-linked companies (GLCs) transformation programme.

Liew Kee Sin
The official said the key plenary sessions included a keynote address by Prime Minister Datuk Seri Abdullah Ahmad Badawi and a speech by Datuk Azman Mokhtar, head of the national investment arm, Khazanah Nasional Bhd.

Aseambankers research head Vincent Khoo said expectations of incentives for the Iskandar Development Region (IDR) were abolishment of the RPGT and suspension of stamp duty for sale of property.

“These are the most talked about. The idea is to support the development of South Johor,” Khoo said, adding that the long-waited restructuring of Malaysia Airports Holdings Bhd was also likely to be unveiled during Invest Malaysia.

SP Setia Bhd managing director Tan Sri Liew Kee Sin welcomed the government’s move to relax RPGT as it would boost property investments.

“The lowering of transaction costs will drive home upgrades among locals while foreigners will find our properties more attractive. For the property sector to thrive, we need foreign-driven investment apart from domestic demand that tracks the income growth of the general population,” he told StarBiz.

Liew noted the current disparity between the RPGT rates for locals and foreigners was not consistent with a policy to attract foreign investments.

“But far more important than introducing a one-off single incentive, is that the Government should make a concerted effort to improve and streamline the underlying policies and procedures to encourage foreigners to settle down in our country.

“We must attract an expatriate community to live and work here. This will boost demand for local properties through the Malaysia, My Second Home programme,” he said.

IJM managing director Datuk Krishnan Tan said abolishing the RPGT would spur direct demand in the property sector and indirect demand in the construction and building material sectors.

“The property and construction industries have high multiplier effects and that would be positive for the economy as a whole,” he told StarBiz.

I-Bhd CEO Eu Hong Chew said that when a listed company forms a joint venture (JV) with a foreign group, it would be helpful if there was deemed compliance with the policies of the Foreign Investment Committee.

“As listed companies are already bumiputra-compliant, JVs with foreign developers could be treated as automatic compliance, for instance, if the JVs are 51% controlled by local listed companies. That would speed up the business process,” he added.

As to concerns that a removal of RPGT would lead to a recurrence of speculation in houses, Eu said: “The economy today is different from yesterday. A lot more houses are being built today. There is no shortage of condominiums.”

Crescendo Corp Bhd managing director Gooi Seong Lim concurred, saying: “I believe the ample supply would limit sharp price increases,” he said.

He also hoped the Government would relax the ruling on the period to release bumiputra reserve units.

For industrial properties, which Crescendo focuses on, bumiputra reserve units could only be released to other buyers after 12 months. Shortening of the period to six months would facilitate purchases by foreigners, Gooi said.

CAPITALAND group president and CEO Liew Mun Leong yesterday set the company the target of developing at least one new Raffles City every year.

CAPITALAND group president and CEO Liew Mun Leong yesterday set the company the target of developing at least one new Raffles City every year.

Mr Liew, who was briefing the media on the group’s plans for the Raffles City brand, said CapitaLand aims to have five more Raffles City developments within the next five years, making a total of 10.

He also said that CapitaLand may inject the Raffles City developments into a Raffles City real estate investment trust (Reit), once all the developments are stable and deliver good yields.

He added that CapitaLand aims to manage 10 Reits eventually, possibly within ‘a relatively short time’.

The news comes after the announcement on Tuesday that CapitaLand hopes to double the number of current Raffles City malls to at least 10.

Even this number could increase. ‘At CapitaLand, we like to double our targets,’ Mr Liew said, only half in jest.

China, which already has three Raffles Cities in different stages of development, could have two or three more.

Other countries and gateway cities that have expressed interest in having CapitaLand develop a Raffles City development include India, Vietnam, Japan, and gateway cities in countries such as Russia and in the Gulf Cooperation Council (GCC) region.

Although the Raffles City model is anchored by a large mall, it is in essence a ‘branded integrated development’ with a combination of possible office, hotel and retail segments.

CapitaLand owns the Raffles City trademark, and Mr Liew said: ‘If you have a good product and don’t take advantage of it, someone else will copy it.’

In terms of strategic business unit performance, CapitaLand Commercial registered revenue of $43.2 million in the second quarter of this year, up almost 50 per cent year-on-year.

CapitaLand said this was due mainly to the consolidation of revenue from Raffles City Shanghai which became a subsidiary in September 2006 and higher property management fee income.

Separately, CapitaLand announced yesterday that it had established two indirect wholly owned subsidiaries incorporated in China: Xinyun Investment Management (Hangzhou) Co and Beijing CapitaLand Xin Ming Real Estate Development Co.

Source : Business Times

Raffles Hotels and Resorts

More than 30 properties under Raffles brand name by 2011


(SINGAPORE) Raffles Hotels n Resorts is expanding faster than planned, leading the hotel group to revise upward an early projection - made just four months ago - of the number of properties that will come under its wing.

Mrs Ee-Tan: Said Raffles Hotels n Resorts had stepped up its pace of expansion since its acquisition by Kingdom Holding and Colony Capital

According to the latest forecast, Raffles Hotels n Resorts will have about 30 properties under its brand name by 2011, up from 20 which the group said last November it was targetting to have by then, said Diana Ee-Tan, its managing director.

Speaking to The Business Times in her first media interview since taking the helm last June, Mrs Ee-Tan said Raffles Hotels & Resorts has stepped up its pace of expansion since its acquisition by Saudi Prince Alwaleed bin Talal's Kingdom Holding and Los Angeles-based Colony Capital.

Just four months ago, Grant Kelley, chief executive of Colony Capital Asia, said he planned to add 10 more hotels and resorts to Raffles' portfolio over the next five years - effectively doubling the brand's portfolio.

But looking at the pace of growth since then, Mrs Ee-Tan said the group should be able to hit 30 properties by end-2011.

Since May 2006, the Raffles group has announced some seven additions to its portfolio, including Raffles St Lucia in the West Indies; Raffles Tianjin Hotel in China; and Raffles Resort Konottaa in the Maldives. The group now has 17 hotels in 16 locations.

'We will be announcing more deals in the next few months, and after that, we should be able to add another 10 properties,' said Mrs Ee-Tan. 'So by the end of the five years (2011), we will have about 30 properties.'

Another deal in the Caribbean will soon be announced, she said. For growth, the group is zooming in on Asia, North America and the Middle East. It places a lesser emphasis on Europe.

In North America, the Raffles brand could soon have a presence in San Francisco, New York, Chicago, Boston, Toronto and Vancouver, among other cities, Mrs Ee-Tan said. In Asia, one area of focus for the group will be secondary cities in China, which are seeing rapid economic growth. And in the Middle East, the group is in talks with 'several suitors' to enlarge its portfolio, she said. One possible location for a Raffles hotel in the Middle East is Abu Dhabi.

In line with the larger ownership's asset light strategy, Raffles will try to grow mainly through management contracts, Mrs Ee-Tan said. But the group remains open to taking equity stakes in projects if needed.

Raffles Hotels & Resorts is now part of Fairmont Raffles Hotels International, a hotel company headquartered in Toronto. The company owns and manages 120 hotels in 25 countries under four brand names - Fairmont Hotels & Resorts, Raffles Hotels & Resorts, Swissotel Hotels & Resorts and Delta Hotels - as well as vacation ownership properties managed by Fairmont Heritage Place.

The group has been able to ramp up the speed of expansion under the new management because it can leverage on greater resources, Mrs Ee-Tan explained. There are now more funds to works with, and expansion is being driven by development teams based around the world, rather than just out of Singapore like it was before Kingdom Holding and Colony Capital entered the picture.

The Raffles chain also benefits from increased patronage as a result of a common online booking system.

But while the Raffles group has evolved some ways, Mrs Ee-Tan is quick to point out that what remains consistent is the Raffles brand name - associated with unparalleled luxury by its patrons.

'The Raffles brand continues to enjoy great recognition,' said Mrs Ee-Tan. 'And what has not changed is that the brand continues to be anchored in Singapore.' The new ownership, she said, understands that the Raffles brand has 'cachet', and will continue to stay true to its roots.

Most Raffles properties remain small in size, usually comprising between 150 and 250 rooms. This will be maintained to keep the Raffles feel of a residential sanctuary, Mrs Ee-Tan said.

In Singapore, the large Raffles The Plaza hotel will be rebranded as a Fairmont hotel, she said.

Even when Raffles Hotels n Resort is expanding rapidly, all properties will be vetted carefully to ensure they are of Raffles quality before the group decides to put the Raffles brand name on it, Mrs Ee-Tan said.

SINGAPORE,S Tanglin Shopping Centre may hit en bloc trail

The owners of Tanglin Shopping Centre may hit the en bloc trail and could pocket a total of around $500 million, property market watchers say.

Some owners have been mulling over a collective sale of the ageing freehold property, and have requisitioned an extraordinary general meeting tomorrow to discuss the idea and elect a sales committee, BT understands.

Tanglin Shopping Centre is on a site of about 68,500 sq ft and has a strata area of about 230,000 sq ft. It comprises a seven-storey retail podium, a 12-storey office tower, a basement carpark and a multi-storey carpark.

Analysts estimate the existing gross floor area (GFA) at 300,000 sq ft and reckon a new project would be allowed the same maximum GFA, even though this is slightly above the maximum 287,700 sq ft based on the site’s 4.2 plot ratio under Master Plan 2003.

The site is zoned for commercial use with a 20-storey maximum height under the Master Plan.

Industry observers reckon the plot could fetch about $1,800 psf of potential gross floor area, which works out to $518 million. The assumption is that no development charge is payable.

The breakeven cost for a new commercial project could be around $3,200 psf. ‘The site could be suitable for a retail mall and perhaps some small office, home office (Soho) units,’ a property player said.

Observers say redeveloping the landmark shopping centre would spruce up the stretch of Tanglin Road that joins Orchard Road and help it keep pace with major new developments going up near Orchard and Somerset MRT stations.

Furthermore, the present Tanglin Shopping Centre would stick out like a sore thumb when the St Regis Residences and hotel next door are completed soon by City Developments, Hong Leong Holdings and Trade and Industrial Development, which is a partnership between Hong Leong and Japan’s Mitsui Group.

Market watchers reckon Hong Leong Group, which includes listed CityDev, is eyeing Tanglin Shopping Centre with a view to putting up a project that would complement the luxurious St Regis.

CityDev, through its hotel arm Millennium & Copthorne Hotel, already has a stake of about 35 per cent in Tanglin Shopping Centre, including ownership of 325 parking lots.

Market watchers say Hong Leong has been in talks with some owners at the shopping centre to ask if they want to sell their units to it, rather than wait for an en bloc sale.

If CityDev were to gain control of the shopping centre, the new project on the site could likely have a bridge link to the St Regis development.

Hong Leong’s sizeable presence in the area includes Orchard Hotel, Palais Renaissance and Delfi Orchard. It also owns some units in Orchard Towers.

Other contenders for Tanglin Shopping Centre include Far East Organization and Hotel Properties, both of which also have big stakes in the area. Far East owns some units in Tanglin Shopping Centre and its listed unit Orchard Parade Holdings owns the namesake hotel next door.

Hotel Prop owns a stretch of properties nearby - HPL House, Forum The Shopping Mall, Hilton Hotel and Four Seasons Hotel. It also has a stake in Ming Arcade.

Tanglin Shopping Centre was developed in two stages, in the early 1970s and early 1980s. The project, developed by SK Chee Pte Ltd, was famous back then for its medical clinics.

Clinics still operate in the building, and property agents say some doctors who own their premises may be reluctant to do an en bloc sale because of the difficulty of buying replacement premises in the area.

Source: The Business Times, 04 May 2007

As prices of luxury property continue their seemingly unstoppable climb, the heat is on developers to give buyers more bang for their buck.

As prices of luxury property continue their seemingly unstoppable climb, the heat is on developers to give buyers more bang for their buck. And they are rising to the challenge by offering more “”exclusive’’ projects with fewer, bigger units full of fancy trimmings.

Some 39 luxury projects with a total of more than 3,600 units could be launched this year, says Colliers International. And about two-thirds of these developments will have 100 units or less.

The number of units per project is shrinking as apartments get bigger, market watchers say. For example, penthouse sizes have grown by 20-100 per cent since the 1990s, according to Colliers’ director of research and consultancy Tay Huey Ying.

“”In the 1990s, penthouses were usually about 3,500-5,000 square feet,’’ she says. “”Today we are looking at more and more penthouses in the range of 7,000 sq ft and above.’’

Developers are also throwing in goodies such as European designer fittings, spas in all apartments and a separate pool for each unit to sweeten the pot.

“”As prices go up, people expect more,’’ Koh Brothers chief executive Francis Koh told BT.

“”If you buy a new unit instead of a resale unit, it has to be value-added. So we need to innovate.’’

Luxury home prices in Singapore are indeed on the way up.

In just the first quarter of 2007, prices of uncompleted projects in the Core Central Region - which includes Districts 9, 10, 11, Marina Bay and Sentosa - rose 7.3 per cent.

And for the whole of 2006, prices of uncompleted projects in these prime areas rose 25.4 per cent. With prices expected to keep climbing for the rest of the year, developers are getting creative, making sure their offerings have the works.

SC Global Developments has a few firsts in mind. Its Marq On Paterson Hill will feature one tower with a 15-metre private lap pool in every apartment on every floor. The Marq is expected to be launched this year at upwards of $2,800 per square foot.

And another SC Global project, Hilltops, promises a resort-style steam spa in every apartment. Hilltops is expected to be launched this year at $2,500 to $3,000 psf.

Similarly, Koh Brother’s 53-unit The Lumos, in the Leonie Hill area, will have a sky garden on every floor. Every unit will open on to a landscaped plot of green living space, which Koh Brothers says will provide residents with “”a refreshing sanctuary and an access to nature that is unrivalled among high-rise developments’’.

Besides exclusives like these, developers are splashing out to install the latest designer fittings in their apartments.

At The Lumos, each unit will come with an Italian-made Visentin Rainbow Shower, so you can change the backlight colours to suit your mood while showering. The master bathroom in each unit will be walled with Strass Swarovski Crystal tiles.

And in what the company says is another first, the exterior-facing bathroom windows are made of Liquid Crystal Glass, so you can turn from frosted to clear at the flick of a switch.

With features such as these, says Colliers’ Ms Tay, developers are trying to create a lifestyle that sells their apartments.

But some analysts say all the extras are adding to the cost - which again leads to increased prices.

“”It’s a cycle,’’ said an analyst with a foreign brokerage here. “”People pay more, so the developers spend more money to justify the price. And this again drives prices up.’’

But with luxury home prices still continuing to climb, the trend can be expected to continue this year, the analyst said.

Reason: Finding a comparable property to replace the one sold will now cost a whole lot more

Reason: Finding a comparable property to replace the one sold will now cost a whole lot more

Scoring a collective sale is usually seen as the real estate equivalent of hitting the jackpot, but try telling that to Mr Sulistiowati Kusumo.

The businessman should be overjoyed - after all, he’s going to pocket $2.3 million for his Horizon Towers flat - but he feels shortchanged.

The Leonie Hill condo was sold en bloc last year for $500 million but that now looks cheap as values since then have sky-rocketed.

But what really gets Mr Sulistiowati, 51, steamed is that he did not agree to the sale in the first place.

‘I’m at the losing end and I did not want to sign from the beginning,’ said Mr Sulistiowati, one of 34 minority owners of the 210-unit 99-year leasehold property.

And finding a flat comparable to his 2,400 sq ft one at Horizon Towers would now cost the earth.

There are many like Mr Sulistiowati, whose tales of woe are starting to drown out enthusiasm about collective sales.

Take Grangeford Apartments, near Horizon Towers. It is up for a collective sale, asking about $2,000 per sq ft (psf) - more than double the $850 psf achieved at Horizon Towers.

This has prompted some Horizon Towers owners to try to get their own deal scrapped.

‘The agreement was signed last year so the price is capped. Now the price increases every month,’ said Mr Sulistiowati.

Businessman Ajay Kumar Dhar, 40, backed the sale but admits to have lost out and has yet to find a new unit in the area.

‘Naturally I regret it, but it’s fate. I may have to go to other districts,’ he said.

The 99-year leasehold Pine Grove has avoided the problem by recently rejecting an offer that would have paid each owner about $1.2 million.

Many owners refused to back the proposal, fearing they would not find replacement units as spacious as those at Pine Grove.

Gillman Heights owners signed its deal last year and finally sold in February for $548 million - about $890,000 for 1,700 sq ft units and $950,000 for 1,900 sq ft ones.

Retiree Cheng Wai Chuen, 68, who has a smaller flat, said he has been priced out of the market.

‘I’ve looked around and I would have to pay about $1.2 million for a place that’s about 1,200 sq ft,’ he said.

Software businessman Mah Kah Hoe, 54, added: ‘Even if I want another 99-year flat in the area, I have to top up another 30 to 40 per cent of what I’m getting.’ He will also receive about $890,000.

Others like Mr Cheng have no spare cash to buy a new place until the sale goes through. ‘I have no money, how do I buy?’ he asked.

The sale paperwork can mean the cash is not paid out until nine months after a buyer has been found.

A Gillman Heights resident who wanted to be known only as Madam Ong, has already bought another flat but it was a forced purchase in view of the rising prices.

Her new Pasir Panjang unit is smaller, further from town, has worse facilities and she even had to fork out about $200,000 on top of the proceeds from the collective sale.

Said Madam Ong, a housewife in her 50s: ‘We think it’s queer that people are congratulating us about the en bloc because we never wanted to sell in the first place and now we have to bear the brunt of it.’

If you like a gamble, you don’t have to wait for the casinos to open. Just roll the dice for a collective sale instead.

If you like a gamble, you don’t have to wait for the casinos to open. Just roll the dice for a collective sale instead.

The game plan is simple: Pick a condominium block that looks ripe for a collective sale and buy in before the big payday.

Prices of such blocks are showing rapid price rises as hopeful buyers rush in with an eye on the possible windfall.

Their desire to get a slice of the potential action is driving them to meet inflated asking prices from sellers willing to cash out.

But they are taking a huge bet buying in at inflated levels, if they are merely out to make a quick buck rather than buying a home to live in.

The heightened demand could drive values to an artificial high, said Credo Real Estate’s managing director, Mr Karamjit Singh, with the obvious risk that the anticipated collective sale gets derailed.

‘If the sale does not proceed, the prices could fall from the perceived value.’

Investors should be wary of suburban 99-year leasehold properties selling at prices that include a large premium for a possible sale en bloc, said market watchers.

This is because the chances of a successful sale in such estates are slimmer than the chances of one in estates that are freehold.

Savills Singapore’s director of marketing and business development, Mr Ku Swee Yong, said a freehold site can cost around 20 per cent more than a 99-year leasehold one located next door.

Sale prices have surged at the 280-unit Pearl Bank Apartments near Outram Park MRT Station, thanks to attempts at the 99-year leasehold estate to get a collective sale off the ground.

An agent said that last month he sold two 1,755 sq ft units on high floors: one for $1.01 million and one for $1.09 million. The buyers were a local banker and an Indian permanent resident.

But they might not benefit much if such a sale occurs, as the minimum collective sale price of their units is about $1.19 million, although there is talk this could increase if a higher plot ratio for the site is approved.

The sellers were happy to cash out quickly and buy another property before prices went even higher, the agent said. They also do not have to wait out the collective sale, which might not happen.

Caveats lodged showed that three 1,755 sq ft Pearl Bank apartments were sold last month for $857,000 to $905,000 - compared with just slightly over $600,000 for deals done involving units of the same size last June and July.

At Farrer Court, coming up for an en bloc sale by tender, a 1,453 sq ft unit was sold for $900,000 in March. That beats the $870,000 fetched by one unit in February and the $660,000 fetched for another last September.

The price of the land on which a development sits tends to move faster than the price of individual units, said Mr Singh.

‘It would be unwise to buy into a development that is priced close to the collective sale value,’ he noted.

Nevertheless, not all estates are created equal. The well-located properties will attract more demand than those in less favourable areas.

‘If the collective sale of Pearl Bank doesn’t go through, prices will definitely fall, but maybe by just 10 to 20 per cent, because it is a very central development,’ said a property agent.

The story is different for outlying projects, particularly those with poor rental prospects, said a consultant.

A person buying into such developments - and paying a collective sale premium - would find himself with a bad investment if the collective sale failed, she said.

Still, better rental levels could ease the pain.

At the 99-year leasehold Chiltern Park Condominium in Serangoon, whose residents are working towards a collective sale, a three-bedder sells for $421 per sq ft on average.

If a collective sale goes through, the sum fetched could actually fall below that level once the potential charges that developers have to pay are factored in, according to Savills Singapore.

But investors who recently bought units there could at least get relatively good rents, said Savills, noting that asking rents there now average $2,400 for a three-bedder. This level and the average price give a rental yield of about 5.4 per cent - a very good return in the local market.

If a collective sale fails to come through at a condominium, investors must be able to ride out the market and wait for the next round, which could be years away, said a market watcher.

Anyway, that might not turn out to be such a gamble.

‘At the rate things are going, every old development will find its end and give way to new developments,’ said Mr Singh.

Escalating prices

Pearl Bank Apartments

Last June and July, units of 1,755 sq ft were sold at over $600,000. Last month, three units of that size fetched $857,000 to $905,000; two more, on high floors, went to a local banker and an Indian permanent resident for just over $1 million.

Farrer Court

A 1,453 sq ft unit at this property, which will soon be put up for collective sale, was sold for $900,000 in March. This contrasts with sales done at prices of $870,000 in February and $660,000 last September.

The Americans head for Woodgrove Estate, the Indians to Meyer Road and the well-heeled to Nassim Hill

The Americans head for Woodgrove Estate, the Indians to Meyer Road and the well-heeled to Nassim Hill

American housewife Lisa McMullen used to be scared silly of her countrymen who lived in Woodgrove Estate in Woodlands, the new American expatriate enclave.

Mrs McMullen, who used to live in Shelford Road in Bukit Timah, recalls: ‘I was told how gossipy everyone was, like wanting to know what you were having for dinner. But when we finally moved here, we found that everyone here leads such busy lives they have no time to gossip.’

Since 1997, the American expat community has flocked to Woodgrove from the longstanding American enclaves of Bukit Timah, Tanglin and Holland Road. This is chiefly because the Singapore American School uprooted from Ulu Pandan to Woodlands Street 41 at around that time. Mrs McMullen’s three daughters all attend it.

Freelance interior designer and Woodgrove resident Cheryl Newman recalls of rentals back then: ‘You couldn’t get anything under $16,000′ - so hot was demand for the neighbourhood among American expat parents.

Woodgrove, to the uninitiated, is a neighbourhood on a slope and comprises some 34 three-storey country mansions along lanes with names such as Ashwood, Beechwood and Cedarwood.

It was completed in 2001 by developer Far East Organization. The houses are between 2,800 and 3,000 sq ft each and there is a great concentration of American families there.

Might Woodgrove Estate be just another name for Wisteria Lane, though, home to the Desperate Housewives of TV fame? After all, the spacious houses with bay windows, lofts and more than four bedrooms each actually mirror homes in wealthy American suburbs, a la the fictional Wisteria Lane.

Mrs Newman, a former president of women’s expat club the Singapore Oilwives Association, and her posse hoot long and loud at this.

Aside from the fact that they are all housewives and love cosying up for ladies-only chats, they’d have you know they are ‘anything but desperate’.

Says Mrs Newman: ‘In downtown condos, everyone tends to keep to themselves outside of the club. Here, if you walk your dogs, you will run into at least half a dozen folks you know.’

And no worries if any of Woodgrove’s denizens run out of eggs - just holler to your neighbour for some. Or get them to pick your children up after school.

Halloween, that most American of festivals, is huge here, with even pet dogs being dressed up as ghouls for fun.

It’s a lifestyle leg-up in many other ways: With more space to play with than downtown, they have their own swimming pools and sprawling Balinese-inspired backyards.

But there’s a price to be paid for such lavish living. Some basic amenities they took for granted when they called Bukit Timah or Orchard Road home, such as wet markets and grocers, are sorely lacking in Woodlands.

‘There isn’t even a Starbucks to be had,’ laments Mrs Janet Andrew, who says the nearby Woodgrove mall and Causeway Point have poor pickings, catering more to heartlanders than cosmopolitans.

‘Even the Cold Storage does not stock food expats are used to,’ she says. So the women of Woodgrove drive to the Farrer Road wet market for ‘good fresh chicken’. For slices of Americana, though, it’s still Tanglin Mall.

Mrs McMullen says: ‘When I was living in Shelford Road, my husband Mike used to ring me up after his workday and ask me to join him for a drink downtown. Now I think of the long drive down in the rush-hour jam and just have to say no to such quiet times we used to enjoy.’

Lucky for them then that they and their neighbours are a tight-knit bunch. They’ve even set up an online neighbourhood bulletin board which has come in handy now that burglaries are on the increase in Woodgrove. The families are extra vigilant after a break-in on April 11, and two other attempted burglaries. They also put up with petty thefts - of bicycles, mostly.

The other downside is Singaporean skateboarders who cause a ruckus with their antics well into the wee hours. The police had to be called in to disperse them.

Despite the spectre of intruders, the going rental rate for a Woodgrove country mansion has now gone up to as much as $25,000 a month, they say. This is by far the largest threat looming over this lush suburbia.

The women point out that their husbands’ companies are not likely to tolerate such a spike in rentals. So, if push comes to shove rent-wise, they may just move out.

Says Mrs Andrew: ‘Our husbands and their colleagues are telling us that Shanghai is the next Singapore, and rents there are lower than those here, so you may soon see more American companies relocating their overseas staff to China.’

Still, the estate’s sorority sister vibe should have most American families staying put in the neighbourhood for quite a while to come.

As Mrs Newman puts it: ‘We’ve eaten together at hawker centres here at 3am in our ballgowns and high heels. It’s the stuff that long friendships are built on.’

‘Sometimes people will act like I’m not there, or they think I don’t speak English. But these are only some Singaporeans, so I don’t let that affect me’ Lena Garcia, 30, a maid from the Philippines who has been here on a work permit for the past three years

Malaysia’s YTL Corp and its partner LP World Sdn Bhd have been awarded Sandy Island at Sentosa Cove for about $89.7 million or $617 per square foot

Malaysia’s , and its partner LP World Sdn Bhd have been awarded Sandy Island at Sentosa Cove for about $89.7 million or $617 per square foot of land area.
The 145,442 sq ft man-made island in the upscale waterfront housing district’s Southern Residential Precinct can be developed into 19 bungalows, each with its own private berth.
This is the Malaysian duo’s second win on Sentosa Cove. In September last year, they bagged the Lakefront Collection in the locale’s Northern Residential Precinct which they plan to develop into 12 luxury bungalows. The price they paid for that plot - in a less choice location than Sandy Island - was nearly $50.2 million or $378 psf.
Sentosa Cove Pte Ltd (SCPL) has decided not to award Pearl Island - next to Sandy and which was offered through the same tender exercise which closed on Nov 22 last year. The most likely reason is that the top bid was below SCPL’s expectation, reckon market watchers. Both plots were offered with 99-year leasehold tenure.
YTL and LP World are understood to have been the top bidder for Sandy Island. They did not bid for Pearl Island.
In all, there are five man-made islands designated for bungalow development at Sentosa Cove. The other three are in the Northern Precinct - Coral, Paradise and Treasure. Ho Bee Investment clinched Coral Island in late 2004 for $206 psf of land area, and Paradise in August 2005 for $260 psf. Treasure was sold to a group of individual investors at an average price of $308 psf in late 2005.
YTL, headed by Malaysian tycoon Francis Yeoh, is one of the biggest companies listed on the Kuala Lumpur Stock Exchange. Its partner LP World is a Malaysian township and residential developer.

Wednesday, August 8, 2007

PARKWAY Life Real Estate Investment Trust (Parkway Life Reit),

PARKWAY Life Real Estate Investment Trust (Parkway Life Reit), which launched its initial share offering yesterday, hopes to double its asset portfolio size in two years’ time, the Reit’s manager told BT yesterday.

Right now, the Reit’s portfolio comprises three private hospitals and medical offices in Singapore worth $774.6 million in total.

Justine Wingrove, chief executive of the Reit’s manager, aims to double the portfolio size to about $1.6 billion by end-2009.

A new acquisition could be expected in the next six months, Ms Wingrove said.

‘We have four key markets that we are focusing on - Singapore, Malaysia, India and China,’ she said. ‘There are more immediate opportunities in Singapore, but we are also looking at opportunities elsewhere.’

The trust, she said, can easily draw from sponsor Parkway Holdings’ asset base. Parkway, which is Asia’s largest listed healthcare operator, has some 17 hospitals and medical centres across Asia under its umbrella, including the three being divested into the Reit.

Also, the trust is looking to buy from third-party vendors, Ms Wingrove said.

For the initial share offer, the trust is offering 288.9 million units at $1.28 apiece - raising about $369.8 million.

Some 253.6 million units will be placed out to institutional and other investors, of which 14.6 million units are reserved for subscription by the directors, management, employees and business associates of Parkway Holdings.

Another 5.9 million units are being offered to the public. In addition, 29.4 million units will be allocated to the Singapore registered shareholders of Parkway Holdings on the basis of one unit of the Reit for every 20 shares in Parkway.

There is also an over-allotment option for up to another 43.3 million units.

Assuming the option is exercised, Parkway will hold some 30.1 per cent of the Reit, while the free float will account for another 55.9 per cent.

The rest of the trust (14.0 per cent) will be held by ‘cornerstone investor’ TPG Capital, which also holds a substantial stake in Parkway.

The trust forecasts an annualised yield of 4.7 per cent for the 2007 financial year. This is expected to increase to 4.9 per cent in 2008 and 5.0 per cent in 2009.

Ms Wingrove said that despite the recent downturn in market sentiment, the Reit has seen strong demand from institutional investors. The placement tranche is about 13 to 14 times oversubscribed, she said.

Parkway shares closed four cents up at $3.72 yesterday.

Source : Business Times - 8 Aug 2007

UNITED Engineers has achieved an average price of $1,300 per square foot (psf) after discounts for The Rochester, a 99-year leasehold condo

All 366 units sold at $900 to $1,600 psf in benchmark price for District 5

UNITED Engineers has achieved an average price of $1,300 per square foot (psf) after discounts for The Rochester, a 99-year leasehold condo in the one-north precinct.

The price - a new benchmark for District 5 - easily exceeds the $900 psf average achieved earlier this year for One North Residences just a stone’s throw away.

Sales of The Rochester began on July 16 and all 366 units have been snapped up at prices ranging from $900 to $1,600 psf.

UE staff bought about 13 per cent of the units and foreigners, excluding permanent residents, about 10 per cent.

Foreigners - including Koreans, Japanese and Britons - bought seven of the nine penthouses. The average price per penthouse was about $6 million.

The units were sold through an expression-of-interest exercise.

‘We are extremely pleased to have set a new benchmark of $1,300 psf in average price for private property in District 5,’ said UE Group’s managing director and chief executive, Jackson Yap.

The Rochester, designed by Paul Noritaka Tange of Tange Associates, is being developed by a wholly owned subsidiary of UE.

The last time the group sold a private residential development in Singapore was more than a decade ago - UE Square at River Valley Road.

In two or three months, UE hopes to launch a boutique condo at Balmoral Crescent, in a joint venture with Kajima Overseas Asia.

This freehold development, designed by award-winning SCDA Architects, will comprise about 40 large apartments.

The current target price is $2,500 psf on average but this will be finalised closer to the launch, a UE spokesman said.

The condo will be developed on the former Balmoral View site that Kajima and UE bought in August last year for $52 million or $733 psf of potential gross floor area including an estimated $7.9 million development charge.

The 51,080 sq ft freehold site is zoned for residential use with a 1.6 plot ratio and a 12-storey height limit.

Source : Business Times - 7 Aug 2007

The Horizon Towers saga has taken a new twist

The Horizon Towers saga has taken a new twist, with the thwarted buyers of the Leonie Hill property moving to claim up to $1 billion from the sellers.

After the Strata Titles Board (STB) threw out an application for a collective sale order on Friday last week, the buyers of the Leonie Hill development served notice on the sellers yesterday that they are in breach of contract.

Technically, each of the owners of the 173 units who signed off on the deal to sell Horizon Towers en bloc in February is now personally liable for up to $5.78 million.

The move also puts the position of the minorities - the owners of the 37 units who opposed the en bloc sale - in doubt. While they are not being sued, the development means they are now no longer assured of keeping their homes.

Things appeared to be going their way when STB ruled on Friday that the collective sale could not go through because certain legal requirements had not been complied with.

It is believed that insufficient notices were posted and some documents were not filed.

STB’s decision effectively killed the en bloc sale as it stood because it meant the issue could not be resolved to meet the Aug 11 sale deadline.

Minorities cheered the outcome - but now the tide could be turning the other way.

Allen & Gledhill (A&G), acting for the buyers - Hotel Properties Limited (HPL), Morgan Stanley Real Estate and Qatar Investment Authority - has sent a letter to Tan Rajah & Cheah, representing the sellers.

A&G alleges the sellers are ‘in clear breach of their obligation…to file a proper application to the STB which complied with the requirements of the Act’.

It wants the sellers to extend the deadline for the completion of the sale by four months and file a fresh application to STB for a collective sale order, or appeal to the High Court to reconsider STB’s decision.

‘Our client’s current estimation is that its loss, if the contract is terminated, is in the region of $800 million to $1 billion,’ A&G said.

The buyers agreed to pay $500 million for Horizon Towers’ two 99-year leasehold blocks.

The sellers now have until tomorrow to respond.

Some 84 per cent of Horizon Towers owners backed the collective sale - more than the 80 per cent requirement - but STB’s approval was still needed for the deal to go through.

Source : Business Times - 7 Aug 2007

From 20 per cent lower than Hong Kong five years ago, living costs for expatriates in Singapore are now just 10 per cent lower.

It is getting more expensive for expatriates to live in Singapore, with differences in cost of living between it and other regional capitals like Hong Kong becoming narrower, according to the latest survey carried out by global HR management firm ECA International.

From 20 per cent lower than Hong Kong five years ago, living costs for expatriates in Singapore are now just 10 per cent lower. In a similar comparison with Taipei, Singapore is only 8 per cent cheaper, compared with 16 per cent in 2003.

ECA believes that a large part of this effect is due to weaker currencies and lower inflation in a number of historically more expensive locations such as Hong Kong and Taipei.

An appreciation of about 2.5 per cent of the Singapore dollar against the US dollar in recent times, compared with a depreciation of the Japanese yen and Hong Kong dollar of about 4 per cent and 0.5 per cent respectively against the US dollar, is a major catalyst for Singapore’s diminishing competitive edge, according to Lee Quane, general manager of ECA International Hong Kong.

The ECA survey, held twice yearly on living costs, compares a basket of 125 consumer goods and services commonly purchased by expatriates in over 300 locations worldwide. Goods and services are also given equal weights according to differing consumption patterns in various locations.

Singapore has retained its position as the ninth most expensive city in Asia for expatriates. The only other cities to experience higher rises in living costs in the Asian top 10 were Beijing and Shanghai.

‘While such increases are unlikely to deter companies from relocating staff to Singapore, the cost advantages that Singapore previously enjoyed over its competitors are starting to be eroded,’ said Mr Quane.

Mr Quane also added that the recent hike in Goods and Services Tax (GST) is also expected to have a relatively large impact on living costs and the regional gap is expected to narrow in the future.

In a recent separate survey on accommodation costs in cities around the world, ECA also found that the cost of renting an apartment in Singapore has increased by more than 10 per cent on average in the last six months.

Mr Quane warned that when coupled with relatively higher increases in living costs, a double effect will be created for multinational companies (MNCs) providing for expatriates working in Singapore. However, as long as salaries in Singapore continue to outpace these increases in costs of living, added Mr Quane, MNCs will not actively seek to relocate their businesses away from Singapore.

He also noted that once this is not the case, the country faces the threat of MNCs moving to relatively cheaper regional hubs.

Seoul remained as the most expensive location in Asia for expatriates, followed by Tokyo and Yokohama. Living costs for expatriates in Singapore are about 61 per cent cheaper than the Korean capital, a level that has not changed significantly since the last time the survey was done.

Bangalore was the cheapest location in Asia for expatriates, where living costs were roughly only 60 per the cost of equivalent goods and services in Singapore.

Source : Business Times - 7 Aug 2007

PEARLBANK Apartments in the Chinatown area and Mitre Hotel off Killiney Road have been launched for sale.

PEARLBANK Apartments in the Chinatown area and Mitre Hotel off Killiney Road have been launched for sale.

And on Friday last week, MCL Land said it had bought Dynasty Garden Court 1 in Sixth Avenue for $80 million or $1,160 per square foot of land area. The freehold site is designated for three-storey mixed landed housing. The collective sale was brokered by Credo Real Estate.

Knight Frank says it expects at least $750 million for Pearlbank Apartments. This reflects a unit land price of $1,445 per sq ft of potential gross floor area including an estimated $137 million the developer will have to pay the state to restore the lease on the 82,376 sq ft site to 99 years from a balance of about 62.

In the Killiney Road area, the Mitre Hotel and a two-storey outhouse that sit on freehold land of 39,972 sq ft are expected to fetch about $200 million, or close to $1,800 psf per plot ratio, including an estimated $700,000 development charge.

Jones Lang LaSalle is marketing the property, which is being sold by public tender after a court order was made following a dispute among the Chiam family members who own it.

The site is zoned for residential use with a 2.8 plot ratio - the ratio of maximum potential gross floor area to land area - and a 10-storey height limit. The tender closes on Sept 12.

Pearlbank Apartments, next to Pearl’s Hill City Park, was built on land sold in 1969 under the Third Urban Redevelopment Authority Sale of Sites programme. It was the first all-housing project built on a URA land parcel.

The development has 280 apartments and eight commercial units. Knight Frank says owners representing more than 80 per cent of share values have signed the collective sale agreement. The project has an existing gross floor area (GFA) of 613,530 sq ft, equivalent to a 7.447 plot ratio - higher than the 7.2 designated for the site under Master Plan 2003.

Knight Frank’s price expectation of ‘at least $750 million’ is based on the assumption that the developer can retain the existing GFA in a new project.

‘Based on an average unit size of 1,200 sq ft, 500 new apartments can be built on the site,’ the firm says. Because of the site’s elevation, even lower-level units will have unblocked views of the city skyline, it adds.

Developers have until Sept 18 to submit offers.

Source : Business Times - 7 Aug 2007

We say we want a population of 6.5 million, which I don’t think we can reach. Probably 5.5 million.

The figure of 6.5 million - used for planning purposes - has been doing the rounds for some time now, but Minister Mentor Lee Kuan Yew indicated yesterday that Singapore was unlikely to touch that population level.

Every country wants to grow, said Mr Lee, in the midst of dialogue sessions jointly organised by the Economic Development Board and The Straits Times. That includes Singapore. ‘We say we want a population of 6.5 million, which I don’t think we can reach. Probably 5.5 million.

‘But Hong Kong says it wants 10 million. Why? So it can grow. The world is already bursting at its seams, and you keep on growing. The more you need, the more the pressure to grow.’

After about an hour spent on discussing Singapore’s early history, the nation’s founding leaders, and the nature of leadership, Mr Lee took a question from an audience member - a teacher at the National Institute of Education - who asked what factors might keep Asia from entering its golden age and cast it back to the ‘dark ages’.

‘Nobody can predict what the world will be like in 15, let alone a hundred years, because the changes that have been set into motion are already changing the balance between what the planet can bear and what humans want,’ Mr Lee said.

Global warming will be a serious issue, and the question is whether ‘we have the wisdom and ability to prevent this degradation of the environment’, he said.

‘I have very serious reservations. I don’t see any government telling its people to consume less - less photographs, less travel, less food and more vegetables . . . that’s not the way the world is going.’

Mr Lee said Singapore is well-positioned for the next ten years, barring a major fall-out between China and the US over Taiwan, or over tariff or other protectionist issues, which might curb trade between the two countries.

Singapore’s imports and exports are three-and -a-half times that of the gross domestic product - second only to Hong Kong - so a disruption of trade would severely impact the economy, said Mr Lee.

Mr Lee also took a hypothetical question of whether, if he was a successful lawyer in his 30s here today, would he give up that career to serve in politics.

It depends on my life before 30, he said. If I was brought up poor and achieved an education thanks to a government scholarship, I would probably feel a ‘moral obligation’ to keep the system going, said Mr Lee. But the answer would be different if he came from a well-off family. ‘I’d hesitate. What for? If someone else can do it, let him do it.’

It is a problem the current leadership faces in attracting talent, said Mr Lee, who shared that one of his grandsons (not the current prime minister’s son), though a top student, chose not to take up a scholarship as he did not want to be tied by a six-year bond.

And not everyone was a born leader, said Mr Lee, who recounted what he had learnt about sheepdogs in Australia. A shepherd had told him that it was critical to see if the dog was up to the job. ‘If the dog does not have a pair of eyes that can look at a sheep and scare the sheep into doing this, don’t try.’

Source : Business Times - 7 Aug 2007

Hotel Properties Limited, Morgan Stanley Real Estate and Qatar Investment Authority, the investment arm of the Gulf Arab state of Qatar loss $1b

In the wake of a scuppered Horizon Towers deal, the failed buyers have sent a letter to lawyers representing the majority owners who signed the original sales deal, alleging the sellers are in breach of contract.

The three joint buyers - Hotel Properties Limited, Morgan Stanley Real Estate and Qatar Investment Authority, the investment arm of the Gulf Arab state of Qatar - estimate their loss arising from the aborted deal to be in the region of $800 million to $1 billion.

Hotel Properties’ group executive director Christopher Lim confirmed yesterday that the letter had been sent to law firm Tan Rajah & Cheah.

The consortium of buyers are urging the sellers to consider alternative courses of action. These include extending the deadline for the sales option beyond this Saturday.

There is currently provision for the sales committee to extend the deadline by four months. This would enable a fresh application be filed with the Strata Titles Board.

The move is the latest twist in the contentious collective sale of Horizon Towers. The sale was aborted late last week after months of bitter wrangling between neighbours and lawyers.

Last Friday, the Strata Titles Board ruled in favour of the protesting minority owners of the two tower blocks in Leonie Hill, which were due to be sold for $500 million to the developers.

The ruling in favour of minority owners was the first such ruling in seven years, and came after the board decided that the proper sales procedures were not followed.

The saga began soon after the neighbouring Grangeford condominium was sold en bloc at a far higher asking price per sq ft than the price offered for Horizon Towers.

Unhappy Horizon Towers residents banded together to call an extraordinary general meeting to replace their sales committee. Several of the original members subsequently resigned.

Source : Straits Times - 7 Aug 2007

Mr Wilson Loh, building services manager of the 20-storey office-cum-commercial complex in Raffles Place.

For more than 11 years, the manager of The Arcade received cheques to the tune of nearly $5 million. That sum, said to have gone to his own company, is now missing.

Missing too, since October 2005, is Mr Wilson Loh, building services manager of the 20-storey office-cum-commercial complex in Raffles Place.

It is believed $4.76 million disappeared as a result of 102 cheques made out to Mr Loh’s own private firm, Wilkins Enterprise, for goods and services that were not delivered.

The alleged fraud was spread over 11 years, from 1994 to 2005.

Now, The Arcade’s management corporation is taking the present managing agent - DTZ Debenham Tie Leung (SEA), and its subsidiary - to court to recover its missing $4.76 million. A High Court pre-trial conference on the civil suit is due to be held next week.

Mr Loh became building supervisor in 1991, when DTZ Leung Pte Ltd was The Arcade’s managing agent until March 1997. He kept his job when in April 1997, a subsidiary - DTZ Debenham Tie Leung Property Management Services - took over as managing agent.

It was DTZ that discovered Mr Loh’s alleged misdeeds on Oct 3, 2005, after a cheque bounced.

By then, Mr Loh had gone missing.

DTZ contacted the police. It also sent a notice to all subsidiary proprietors explaining the situation and assuring them The Arcade would continue to run as before.

In a statement yesterday, it said it had then provided an emergency float of $100,000 to ensure services could continue.

As building supervisor, Mr Loh handled all administration work involving building maintenance. He dealt with contractors and made recommendations for payment.

He also produced monthly account statements for The Arcade’s managing council and annual audits.

The warning bells first sounded in September 2005, when a cheque for some $524,000 from The Arcade to its engineering sub-contractor bounced. A computer hard disk from Mr Loh’s Arcade office was later found to be missing. So were some files.

It is believed there were two sets of accounts, at least from 1997 to 2004. The second fraudulent set, purported audited, and shown to The Arcade’s management in 2004, had a sum of $2.75 million. In fact, only $45,305 was left by then, according to court documents filed.

Police have also been investigating the alleged frauds. Police spokesman Mohamed Razif confirmed a report had been received but deemed it ‘inappropriate to comment as investigations are ongoing’.

DTZ, through its lawyers from Allen & Gledhill, disputes The Arcade’s claims. It is expected to argue that as Mr Loh reported to the chairman and council members of The Arcade’s management council, they had full control and supervision over him.

The Arcade, through its lawyers from Harry Elias Partnership, is expected to argue that Mr Loh lied to The Arcade’s management to induce it to make out cheques payable to his firm, Wilkins Enterprise.

The Arcade is also seeking damages for expenses incurred in redressing the loss, including legal costs, engaging forensic audit consultants to uncover the alleged frauds, and having to seek a loan to fund its operations after the $4.76 million loss.

Wilkins Enterprise, which operated from International Plaza in Anson Road, is now defunct. Mr Loh was made a bankrupt in February.

A DTZ statement said it could not comment further on the case as it is now the subject of legal proceedings.

It said: ‘We understand that the loss arising from the case, if any, will be covered by insurance. Our operations will not be affected in any way.’

Source : Straits Times - 7 Aug 2007

UNITED Engineers (UE) is mulling over starting a retail real estate investment trust (Reit) backed by malls in its new mixed development in one-north

UNITED Engineers (UE) is mulling over starting a retail real estate investment trust (Reit) backed by malls in its new mixed development in one-north and UE Square.

Alternatively, it could sell the retail space of about 100,000 sq ft at the mixed development to an existing Reit or another party, its managing director and chief executive officer, Mr Jackson Yap, told The Straits Times yesterday.

UE Square is a mixed development with 78,737 sq ft of retail space.

He said this after the builder announced that it has sold all 366 homes at The Rochester, which is located at the same 99-year leasehold development as the one-north mall.

The residential units were sold at an average price of $1,300 per sq ft (psf), UE said in a statement yesterday. Prices ranged from $900 psf to about $1,600 psf.

The Rochester, designed by famed architect Paul Noritaka Tange of Tange Associates, is the second condominium to be marketed at the 200ha research hub one-north.

The first - the 405-unit One North Residences - was sold in March at $850 psf to $950 psf on average. Like the first condominium, The Rochester was bought mainly by locals. Its nine penthouses that come with private lap pools, however, were purchased mostly by foreigners, at $4 million to $8 million each.

UE’s one-north mixed development also consists of 125 service apartments and a 250-room hotel. The company last launched a residential project - at UE Square - more than a decade ago. But more will come, said Mr Yap.

For now, UE is focusing on its next project, a high-end one located at Balmoral Crescent.

It plans to launch and market this 40-unit development in Hong Kong and Jakarta at about $2,500 psf in October.

UE had tied up with Kajima Overseas Asia to buy the Balmoral site in a collective sale last August for $52 million or just $733 psf of potential gross floor area, inclusive of development charge.

Source : Straits Times - 7 Aug 2007

The soaring property market and supply crunch has forced employers to raise the housing allowances for expatriates by as much as 20 per cent.

The soaring property market and supply crunch has forced employers to raise the housing allowances for expatriates by as much as 20 per cent.

Average apartment rentals in the prime districts of 9, 10 and 11 have jumped by 36 per cent in a year, a recent study by real estate consultancy Savills Singapore showed.

The American Chamber of Commerce’s annual Asean Business Outlook poll found that 61 per cent of the 95 senior executives in Singapore surveyed were dissatisfied with housing prices, up from 42 per cent last year.

Residential property prices in prime districts - where these executives were most likely to live - rose 25.4 per cent last year.

Islandwide, home rentals climbed 10 per cent last year.

Increases in housing allowances for this group is a concern as it could raise the cost of doing business in Singapore compared with other cities and blunt its competitive edge.

But housing rentals have also been rising in other global cities such as Hong Kong.

Some analysts have also noted that housing rentals are not the most critical component of the costs of expatriates, given the red-hot demand for top talent.

Recruitment consultants said some companies have already responded to the changes by adjusting the allowances that their expatriate employees get.

‘Companies that are regionally or globally headquartered here started to review housing allowances earlier this year.

‘Most have already revised and implemented the new allowances,’ said Ms Annie Yap, the chief executive officer of recruitment consultancy GMP Group.

While the allowances vary across industries, estimates indicate that they have risen by about 20 per cent.

Ms Yap said that a chief executive officer who previously received between $10,000 and $20,000 in allowance per month would now get as much as $12,000 to $24,000 a month.

A vice-president or regional head who was entitled to between $8,000 and $15,000 a month would now get a new allowance of between $9,600 and $18,000.

With an increasing trend for companies to give their employees a lump-sum package that covers housing, it is mainly senior executives who still get a separate housing allowance.

Mr Charles Moore, managing partner at recruiting company Heidrick and Struggles, agreed that allowances had been adjusted in some cases.

He said: ‘The revisions have been mostly market-led, rising from 15 per cent all the way to 100 per cent, according to the new rentals.’

Mr Mark Ellwood, managing director of recruitment consultancy Robert Walters Singapore, said: ‘Some have already completed the reviews and implemented them, especially with newly incoming expatriates, increasing allowances by about at least 10 per cent. The amounts vary across the industries.’

But there are still companies which have yet to revise their allowances - although it looks like there is growing pressure on them to respond.

Mr Ellwood said: ‘There are currently a number of companies reviewing existing housing allowances. They are also considering whether they need to start giving housing allowances to those who do not currently have them as part of their job package.’

Mr Paul Loo, a consultant at Michael Page International, said: ‘Some expatriates have asked for more, but there are companies I have encountered that have not committed to reviewing existing policies.’

But Mr Loo expected that ‘these firms will probably review their policies soon, especially towards the end of the financial year’.

Feedback from the expatriate community has led the American Chamber of Commerce to consider urging companies to make changes.

Mr Alonza Williams of the American Chamber of Commerce told The Straits Times: ‘We have received feedback about the state of current housing allowances and are looking into the matter.

‘We have not made any recommendations to companies, but may do so in future.’

US citizens who work abroad face double-taxation and are finding it tougher, especially with the recent cuts in housing allowances for Americans overseas.

When contacted, Mr D.M. Arulraj, Standard Chartered Bank Singapore’s head of human resources, said: ‘As part of our policy, we constantly monitor rentals closely and do make adjustments from time to time according to market conditions.

‘With current rentals rising in the prime districts, it will not be unexpected in the near to medium term to see new enclaves of preferred expat private housing to emerge.’

Source : Straits Times - 6 Aug 2007

What risks should businesses in Singapore be most concerned about for the rest of the year? What, if anything, can they do to cope with these risks?

What risks should businesses in Singapore be most concerned about for the rest of the year? What, if anything, can they do to cope with these risks?

Annie Yap CEO The GMP Group

IN spite of recent general success in Singapore and the region, we cannot forget that it is an interlinked global economy. Whatever happens beyond our arms’ reach will affect us like an arrow from a seasoned archer, making the economic outlook very difficult to predict. Singapore must keep in mind the possible worsening of financial imbalances between greater forces like China and the US.

In that respect, businesses cannot afford to be complacent in the current upbeat sentiment. Good times allow for a more creative use of budgets, but it should not warrant impulsive risk-taking and uncalculated decisions. Factors like rising prices from increased levies and taxes as well as higher overheads resulting from wages and rental should be taken into account in formulating forward-moving policies. Then there are other possible factors that could come into play in the near future, like rising oil prices, or even shock occurrences like terrorist attacks or a flu pandemic. It pays to have pre-emptive plans for any adverse change in business conditions.


Tony Sealy Managing Director Intense Animation Studio

SINGAPORE is looking more expensive than it has done before. This will deflect business to other countries, especially India and China. There may be a global hitch in stock markets causing a tightening of belts all round. Advertising, promotion and training are all candidates for cutbacks if that comes about. Companies will do well to control their costs as vigorously as ever and to widen their customer base beyond Singapore. Short of a world economic catastrophe, any correction is likely to be moderate and short-lived.

Ross Wilson Managing Director Consumer Products and Services APac Region Trend Micro (Singapore) Pte Ltd

IN my view, business risks can be categorised into those we can control or ameliorate (business costs) and those we cannot (the rest). While we have planned for the impact of the uncontrollable risks, my focus will be on managing those that I have some influence over. Singapore is a global hub and, as such, global business risks have always been a feature of doing business here.

Lars Ronning President, Asia Pacific (excluding China and Japan) Tandberg

FOR the rest of the year, businesses in Singapore should keep an eye on their business costs in the face of rising rentals due to the office-space crunch. The labour market is also extremely competitive presently and this will have a direct impact on the company’s bottom line. While businesses are struggling to cope with these challenges, they can employ technologies like visual communications that will help mitigate the rising business costs. For instance, video conferencing can help reduce office overheads such as employee travel expenses by allowing employees to communicate both internally and externally from the comfort of their office. At the end of the day, the bottom line is all about reducing the cost of operations while remaining productive.


Wee Piew CEO HG Metal Manufacturing Ltd

AS an open economy with a small domestic consumption base, Singapore is susceptible to winds of change from the major economic powers like the US and Japan and rising Asian powers like China and India. As I see it, the major risks looming in the coming months will continue to be the extent of sub-prime mortgage woes on the US economy and the overheating and asset bubble of the Chinese market. Both these uncertainties will likely continue to impact equity and currency volatility not just in Singapore, but globally. There is very little that a small country like Singapore can do in the face of such volatilities except to continue on its own path towards re-inventing the Singapore economic model, maintaining fiscal prudence and promoting good corporate governance.

On the other hand, I do not see rising business costs as a major risk for Singapore for the time being. It is precisely because Singapore is an attractive destination for businesses and investors alike - especially in recent years where it is re-inventing itself - that wages and property prices are rising.

Phillip Overmyer Executive Director Singapore International Chamber of Commerce

FOR the past 12 months, Singapore has enjoyed strong growth across most sectors of the economy, with advance estimates showing that real GDP rose by 8.2 per cent on a year-on-year basis in the second quarter of 2007. The big question many firms must struggle with now is the extent to which potential problems in the US or China markets may impact production in Singapore. Fears over the US housing market, market tightening in China, and the ripple effect these factors will have on the broader economies are probably the largest worry facing companies with significant operations in Singapore. And the shifting roles of the US and China in both production and consumption make these analyses much more difficult today.

Beyond these issues, the general consensus of our members from various industry sectors is that there are few serious risks facing businesses in Singapore. I would call them ‘challenges’ instead, and these could be narrowed down to a few key factors such as labour, rental/property price increases, and the possible outbreak of bird flu.

As the economy prospers, companies inevitably do require more labour and higher skills. Our ageing population also means more foreign workers with appropriate skill sets are roped in to fill vacancies. In many sectors, such as IT and banking, while wages have been on the increase, the local labour pool has not been able to match up accordingly. Foreign labour and expertise are still required to fill in the gaps to cope with the increased number of projects in the market.

Higher property prices and rentals do add another factor to the equation, and this may also translate to higher costs in the hiring process, as employees demand higher wages and more incentives. Finally, the possible outbreak of bird flu is like a ticking time bomb and companies have to seriously consider putting their business continuity plans (BCP) in place if they haven’t already done so.

Angeline Teo Principal Consultant d’Oz International Pte Ltd

THE challenges for businesses over the past months and in the coming months will continue to be increasing rentals, some over 100 per cent; GST hikes; and escalating staff costs with new recruits asking for higher salaries and existing ones demanding increments. Companies will experience higher staff turnover if they do not quickly embark on a staff retention strategy.

It is an opportune time for organisations to reassess their business strategies and re-invent themselves to stay relevant in this competitive economy. While most are concerned about savings, successful companies will invest in their people through a series of transformational programmes and training.

Saw Phaik Hwa CEO SMRT

THE Singapore market outlook remains healthy for the next six months but sentiments are that a correction is inevitable and may be significant. What is important at this stage is for businesses, especially small and medium enterprises, to keep a closer watch on market developments. I would say, ride the wave but factor in the impact of a weakening US dollar when making investment or market entry decisions. There will also be upward pressure on operating cost, be it from new oil price shocks, rising manpower costs, or from business interruption risks such as the threat of terrorist acts and pandemics.

Even the best of contingent plans will not fully shield a business from a market correction or terrorist strike. The challenge for businesses like SMRT which provides public transportation will be keeping such an essential service affordable amid escalating operating cost.

Leslie Loh President SunGard System Access

BUSINESSES all over Singapore are being shaken by a sudden increase in overheads. Compounded with the risks in currency exposure, the impact on profit are proving to be rather significant. Many companies are taking the opportunity to seriously assess their exposure, in order to take timely action on any adverse risk. We are fortunate in that, in times of uncertainty and risk, the demand for financial software grows, especially those for risk management. Businesses have found, particularly in volatile markets, that risk management software makes them less exposed to this volatility.

Eric Hoh Vice-President, Asia South Region Symantec

TO quote Senior Minister Goh Chok Tong, speaking as chairman of the Monetary Authority of Singapore, we should always be prepared, despite the country’s rosy prospects. There are a multitude of external factors that we need to contend with, such as financial risks, health risks, environmental risks and security threats. With Singapore playing a critical role as the regional hub, we need to use this opportunity during the good times to make strategic technology investments that can help us safeguard the infrastructure and data that reside here. We need to build robust risk management systems that can minimise the impact of downtime on infrastructure, applications and data caused by unplanned disruptions. And this is Symantec’s vision - to build confidence in the connected world.

Ng Kong Yeam Group Executive Chairman Sino-America Tours Corporation Pte Ltd

DESPITE the fact that the expected annual growth of Singapore will rise to 8 per cent annually for the next few years, businesses should truly be concerned with and able to manage risks for the rest of the year. Oil prices will rise within this year, so all corporations which consume oil must reduce the cost thereof.

Do not speculate in property transactions in Singapore this year. The property transactions in the US prove to us that the spectacular rise in property will not last forever. The falling US dollar will increase the price of products produced by us in Singapore sold to the US market. Producers must learn how to regulate the transactions, having regard to the rate of exchange.

Rentals and wages will increase the cost of all businesses, so businesses must plan their growth with that in mind. Enter the India and China markets and transact with them using their currency or our currency. Indian and Chinese currency will rise within this year.

Eugene Wong Managing Director SIrius Venture Consulting Pte Ltd

I FEEL that the risks for Singapore businesses for the rest of the year is how to cope with managing future expectations with the rising prices in rental and resources as well as labour. And also how entrepreneurs need to be focus on their business to develop higher value-add to overcome these new higher factors of production and not be distracted with ‘easy’ money in shares or properties.


Glenn Tan Group Chief Executive Motor Image Enterprises

NOWADAYS, you read news about rising office rentals and salaries every day and these are all adding to the cost of doing business in Singapore. When times are good and the economy is booming, it is very tempting for people to get caught up in the euphoria and start overcommitting themselves. The biggest risk any business can face is to develop a blind spot caused by overconfidence. In my opinion, businesses should watch their spending and borrowing even more carefully during the good times to ensure that they don’t overstretch their resources in the long run. If you plan to survive in business, you should be prepared for both boom and bust scenarios. That way, you won’t be caught unprepared when the economy takes a dive and you are stuck with expensive loans and overheads.

Fong Loo Fern Managing Director CYC The Custom Shop Pte Ltd

THE current stockmarket and property euphoria is reminiscent of the boom time in the early 90s. The job market is rosy and young people are finding it easy to get high salaries. This optimistic environment bodes well for the retail industry. But, it also means that operating costs and rentals will continue to increase and margins will be eroded.

It is so tempting in this optimistic environment to go on an expansion spree and to go into businesses that may not be related to our core business. In my area of business, I will tread on the side of caution. We will continue to invest in staff training, improve service delivery and watch our operating costs. In a small market like Singapore, extensive retail outlets may not mean increased profitability.

T Chandroo Chairman/CEO Modern Montessori International (MMI) Group

COMING a long way from the economic doldrums of the late 90s, we are now experiencing a buoyant and optimistic New World in business. Nevertheless, there is a tendency to over-speculate and over-indulge, especially in this exciting Boom Time. Some of the risks that businesses in Singapore may want to avert include overgearing in property and overspending on credits. Escalating rentals and inflationary pressures can also be allayed by having private developers here release more commercial space into the market. The current economic climate may be favourable, but one should always practise prudence (eg in shares and investments) because discreet and well-thought-out plans can help curtail premature or unforeseeable shortfalls.


Lim Soon Hock Managing Director PLAN-B ICAG Pte Ltd

BUSINESSES in Singapore should be very concerned with the depreciating US dollar and the rising business costs: the worse kind of economic scenario to be in. While our fundamentals are strong, it is not realistic to expect our economy to be insulated from the US economic woes and other potential market turmoil.

Our growth prospects, like the rest of Asia, are largely dependent on the US. Until the US is replaced by another mammoth economy - and China is a potential, but not for some more years to come - as the world’s economic engine, whatever happens in the US will have adverse repercussions on the rest of the world. I contend that when the US engine slows down, that of the rest of the world will also slow down, sooner or later, at least for the foreseeable future.

Going forward, I would be conservative in coping with the risks but not be risk-averse. Businesses will do well not to over-invest, keep borrowings to the minimum, watch inventory and contain costs. This would also be a good time to monetise assets and build up a war chest for future expansion and growth.

Tan Kok Leong Principal TKL Consulting

BUSINESSES in Singapore for the rest of the year probably should be more concerned about the risks of a weak US economy and its strong impact on the volatility of the global economy, the possibility of outbreak and spread of diseases such as dengue fever or bird flu, and the unknown work of terrorism.

Probably more prudent on investment, more liquid financially and more savings or insurance may help.

Pinaki Rath Managing Director Gold Matrix Resources Pte Ltd

THE biggest risk is the sense of complacency stemmed by continuing reliance of Singapore businesses on America and Japan. America faces threats of slowdown and Japan a looming political crisis - any of which could spoil the party. The other worrying development is that cheap money is being squandered in prestigious offices and swanky apartments. It is imperative to keep costs down, more so in a good year to ensure enduring competitiveness. The need to increase engagement with China, India, Vietnam and the Middle East cannot be over-emphasised. And Singapore businesses must follow the example set by the government on this front.

Tan Ser Giam Chairman Eastern Navigation Pte Ltd

THE problems in the United States with the sub-prime housing loans and the persistent trade and budget deficits is taking a toll on the US economy and will affect the rest of the world. US treasury secretary Henry Paulson is making attempts to instill confidence in the US economy and talking the US dollar up. The United States can ill-afford to raise interest rates without hurting the mortgage markets and businesses; but not raising interest rates will see a weakening of the US dollar. Whether the US will go into a recession or not will depend on whether China and oil-producing countries continue to purchase US debt.

I see the chances of the US economy going into recession to be more imminent than what the US government and analysts would want us to believe. The carry-trade risks will also exacerbate the crisis.

In a financial crisis, bankers who have been knocking on the doors of businesses will suddenly retreat and it would be more difficult for businesses to borrow money from the banks.

In these circumstances, it is best for businesses to watch their cash-flow and ensure that they have enough finances to tide over the difficult periods.


Lee Kwok Cheong CEO SIM

POTENTIAL risks to the financial system and geo-political risks have been well articulated. Companies face the same risks. I do believe the going would stay good for 2007. My current risk concern is therefore more around supply bottlenecks.

Companies need staff and facilities to ride the growth. On the one hand, we need to compete for them to stay in the game. On the other hand, we worry about ending up with a salary base and a fixed cost that would make us uncompetitive when the good times (inevitably) come to an end.

Building up capacity and capability while retaining flexibility to downsize quickly has to be the way forward. For most companies, this would mean smart outsourcing and investing in scalable systems.

Poh Mui Hoon CEO NETS

BUSINESSES in Singapore are more likely to face a combination of risks, which can include rising costs and weakening US growth - among others. The cost pressures from higher rental and wages are consistent with the booming economy Singapore is enjoying, further exacerbated by more MNCs moving or expanding their operations here. However, this is likely to ease off in a few years’ time when new office supply hits the market and the pace of hiring slows down. Weakening US growth can impact our export industries and financial market, cascading down eventually to weaken consumer confidence. To cope with these developments, companies can exercise flexibility in expanding and hiring, while staying nimble by ensuring their business portfolios and markets are well diversified. NETS, for instance, has embarked on a regional expansion strategy that will see our international markets contribute to a greater share of our revenue.


Sam Yap S G Executive Chairman Cherie Hearts Group

RISING business costs in terms of soaring property prices is probably the single greatest concern for businesses in Singapore today. This is in spite of steps already taken by the government, the effectiveness of which remains to be seen.

As such, companies could look into expanding their businesses overseas. Cherie Hearts, for instance, is aggressively seeking business opportunities in Hanoi and Johor’s upcoming Iskandar Development Region.

Nonetheless, we remain committed to Singapore as our ‘home ground’ and hope to tune in to some ‘goodies’ in the upcoming PM National Day Rally! Will be welcomed if PM can raise this issue and announce some measures to further cool the ongoing property speculation.

Wong Teek Son Executive Chairman and CEO Riverstone Holdings Ltd

AS a leading supplier of cleanroom consumables in the semi-conductor and hard disk drive industry, Riverstone is constantly exposed to the cyclical demand from our clients. Singapore is exposed to the elements of global demand, especially the electronics and manufacturing industry. The seasonal risks are mounting with rising overhead costs and market volatility.

Businesses need to manage the factors of demand, by diversifying to average out their risk exposure in this dynamic environment. Riverstone is serving most of the largest names in the semiconductor and hard disk drive industry and is continuously extending and improving value-added services and product offerings to our clients to mitigate these risks and maintain our position as the leading cleanroom consumables manufacturer.

Fahmi Rais CEO iBrand Stretegy Group Pte Ltd

THE service sector sees an upswing with the current wave of business and spending optimism. However, B2B may see cost management as a challenge as supply chain keeps passing the costs. If that is containable, profitability outlook will scale-up, otherwise, there will be contraction despite the better than expected economic growth. The rest of the year looks set to cruise unless stock market continues to see spiralling shock-and-crashes. While favourable business climate is expected to continue next year, the time is apt to consider diversification (as opposed to expansion) for better risk-control and distribution of disposable resources.


Charles M Ormiston Director Bain & Company

THE biggest risk I can think of right now is some form of pre-emptive strike by the US and/or Israel against the Iranian nuclear facilities. The window for such a strike appears to be in the next couple of years. I believe this would catalyse a major setback to the global economy - a very significant spike in energy prices (US$150 per barrel?), an escalation of violence in several Middle Eastern countries, and a disruption in already strained relations between the US, Russia, China, France, Germany and the UK.

The US economy is sending a number of mixed signals - credit risk and overcapacity problems in the housing sector, potential setbacks in the private equity sector and higher market volatility set against good growth and employment performance. A huge question is the extent to which Asia has ‘decoupled’ from the US economy and would not be dragged down by a US downturn.

Rapid economic growth in the last 20 years has not been evenly distributed - the efficiency and benefits of capitalism have always accrued more generously to the most flexible and equipped. Changing demographics are also causing shifts in the percentage of voting populations who are elderly, who maintain different political objectives then the working population. I believe these two dynamics will result in greater divergence of political agendas in key democracies and will result in setbacks in trade liberalisation, laissez faire attitudes towards mergers and acquisitions and less progressive taxation policies. These pressures will disproportionately affect the West.

Within Singapore, the inflation in house prices and rentals is sharper then I would have ever predicted a couple of year ago. This will unsettle both expatriates and the ‘have nots’ in the Singapore property sector. The financial sector is notoriously cyclical.

Set against this, I would certainly advise firms to undertake a rigorous contingency planning process for 2008 - take the steepest revenue drop your firm has had in the last 12 years (Asia crisis, dotcom bubble burst) and run a scenario for that level of fall in 2008. Simply ask your management team the question - what would we do if this happened again? This often leads to a second question - given this risk, which of the ‘contingent actions’ should we take now to avoid being ‘caught out’ if there is a sharp downturn in 2008?

Sanjay Prabhakaran Director, South-east Asia Baxter Healthcare (Asia) Pte Ltd

LOCAL companies have had plenty of experience in managing risks such as rising business costs, currency fluctuations, tightening labour supply and the like. I am sure that they will continue to vigilantly guard against these risks.

However, the biggest risk of them all (particularly so in this part of the world) is one that they generally cannot protect themselves against. Therefore, the onus of safeguarding businesses - in fact, all of Singapore - against Risk No 1 lies with the Government.

Risk No 1 is bird flu because a full-blown pandemic in Singapore can potentially bring everything to a virtual standstill, as observed during the SARS crisis of 2003.

Recent H5N1 outbreaks in countries like Indonesia and Vietnam are stark reminders that Singapore is in close geographical proximity with some of the world’s most worrying H5N1 hotspots. Hence, pandemic preparedness should be right at the top of Singapore’s healthcare agenda at the moment. The government should work in tandem with the corporate sector in ensuring pandemic preparedness. Proactive measures to contain any outbreak include preparing contingency plans like inoculating front-line healthcare workers, practising good hygiene, and, most importantly, building vaccine stockpiles.


Charles Reed CEO interTouch

IN many respects, Singapore is an excellent place for businesses to prosper. That is why many companies set up offices and even headquarters here, like interTouch. However markets are dynamic and constantly present new challenges.

The first risk that businesses in Singapore face is the issue of higher operating costs as a result of escalating property prices. Attracting as well as retaining talent will also be a challenge as wages increase and employment opportunities are no longer limited to geographic boundaries. Companies must therefore allocate the necessary resources to develop effective cost management and good HR practices.

Finally, today’s business climate is not just about products and services. Social and environmental issues cannot be overlooked. But with many companies trying to go green, developing an environmental initiative that will actually succeed will require commitment and strategic planning.

Richard Chua Managing Director Yusen Air @ Sea Service (S) Pte Ltd

THE world electronics industry is going through a down cycle now, although everyone is hoping that it is going to pick up from the second half of the year for the Beijing Olympics 2008. This turnaround is very crucial to the Singapore economy as more than 50 per cent of our manufacturing is electronics-based.

At the top of the risk factors which may delay this turnaround would be a dive in the property and stock markets, both are at the peak now. Oil prices are said to be going up, the airlines have revised their fuel surcharge their times in the last few months, coupled with the increase in GST and employer CPF contribution rate, corporations in Singapore are keeping their fingers crossed for the turnaround to come faster.

Derek Goh Executive Chairman/ Group CEO Serial System Ltd

THE recent Wall Street jerks in response to the US sub-prime mortgage market is an early signal of the volatility of the US economy which has a major impact on the global markets. Thus, the potential risk for the next six months clearly is the slowdown in US imports that will put the brakes on manufacturing powerhouses China, India and Japan.

Singapore exporters with large markets in US will be badly impacted if US imports slow to a standstill by X-Mas. One consolation is that the huge US arms deals with the Middle East will bolster the US defence industries that contribute to US employment and consumption growth. Barring any unforeseen circumstances, Singapore economy should be able to sail smoothly into 2008.

Michael Reading Managing Director Island Power

PRICES of resources and fuel have been on an upward trend globally which translates into rising electricity generation costs. Increases in utility costs at a time of burgeoning demand will be a major challenge for all stakeholders.

To achieve optimal energy efficiency and key environmental objectives, as well as ensuring the security of critical energy supplies, the Singapore government must follow through on its progressive plans to liberalise the energy market. This will help eliminate barriers to entry for new entrants, mitigate the market and pricing power of incumbent energy importers and generators and enable all generators to have access to competitively priced fuel supplies which results in efficiently priced electricity for consumers.

Alfred Wong Managing Director/Architect Alfred Wong Partnership Pte Ltd

WITH all the hype about the boom in the real estate as well as the share market (up to very recently being on a high level) combined with the news of the $100 million condo for one Singaporean family and the sale of $1 million cars, we are in danger of losing our image as a society with frugal habits and a high standard of work ethics.

Despite the volatility in our equity market owing to US fiscal problems, our much publicised ambition to put money in extravagant projects in the private and public sectors may give the wrong signal to potential investors, who have up to now, regarded Singapore as an Asian Switzerland.

Anton Ravindran CEO & Co-Founder Genovate Solutions Pte Ltd

RISING inflationary pressures due to increase in rental and property costs (according to reports our prime office rents have appreciated more than 3 times as fast as Hong Kong and Japan) amongst others can not go on unabated.

The current “irrational exuberance” experienced which may have partly contributed to the upward inflationary pressures is the biggest risk that businesses such as ours face given the cost/price advantage experienced by our competitors in the region.

However, whether this is a temporary woe is too early to conclude and generally the market forces will eventually correct.

But the trick for business is to be prepared to avoid becoming a victim of the bout of “irrational exuberance” and the market not to exceed the speed limit and not to be overly reliant on government intervention. The best way to cope is to go back to the basics of building successful companies and sustainable businesses even in today’s digital economy.

David Choo K T Senior Partner/VP Consumer Products Kepner Tregoe Asia Ltd

FROM a financial perspective, Singaporean companies could protect themselves by hedging against interest rates and currency fluctuations. However, on an ongoing basis, business leaders should continuously be managing risk of business failure, attributed to losses caused by changing markets, shorter product life cycles, greater customer demands, increased competition or lowered efficiency.

Source : Business Times - 6 Aug 2007